Corvus considers two-stage development at Bullfrog

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2012-12-06

VANCOUVER — Vancouver-based explorer Corvus Gold (KOR-T) has released an amended preliminary economic assessment (PEA) on its wholly-owned North Bullfrog gold project in southern Nevada that models a heap-leach operation averaging 74,800 oz. of gold production annually over a ten-year mine life.

Corvus' updated model opts for a two-stage development option that would carry lower upfront capital costs and result in a faster road to production. Average annual gold output at Bullfrog has been bumped from 57,700 oz. under the previous assessment to 74,800 oz. under the updated model — effectively decreasing mine life by roughly two years.

Average throughput rates have subsequently jumped from 44,000 tonnes per day to 55,000 tonnes per day, while total operating costs have risen from US$4.27 per tonne to US$4.60 per tonne. Gold recoveries have improved from 69% to 75%, and strip ratio has remained relatively consistent at 0.48.

The crux of the new proposal is to bring Bullfrog into production by 2014, roughly two years earlier than previously modelled. Under the new scheme up-front capital costs for a first phase would drop roughly 12% to US$60 million. Corvus would initiate operations on its patented mining claims — which contain portions of the Mayflower and Jolly Jane deposits — before tapping deposits located on Federal land claims during a second phase that would cost an additional US$34 million in capital expenditures.

The first phase would cover two years of production at a 7,700-tonnes-per-day throughput rate before the company started up construction on phase two in its second year, which would ramp-up throughput to design specifics by adding an additional capacity of 48,000 tonnes per day by 2017.

Corvus' new model demonstrates mixed results on the economic numbers. Bullfrog’s pre-tax, pre-royalty net present value (NPV) now sits at US$166 million with a 26% internal rate of return at a 5% discount rate. Previous models carried a NPV of US$118 million and an IRR at 29%. The company definitely benefitted from a recent jump in gold prices, with its earlier study using a US$1,300 per oz. gold price, while the updated study relies on a US$1,479 per oz. price.

In-pit resources also saw a slight bump as a result of in-fill drilling at the Mayflower target and an increased amount of bulk-density data at the Jolly Jane and Sierra Blanca zones. Corvus has not yet included its Yellow Jacket feeder zone in estimates, and roughly 21% of its mineable resources lie in the indicated category.

In late November, Corvus released assays from the maiden hole in a second phase drill program collared at the Yellow Jacket target. Earlier this year, the company identified a high-grade feeder zone at Yellow Jacket when it cut 72 metres grading 1.74 grams gold and 98 grams silver in hole 12-138. Yellow Jacket hosts fault-controlled gold and silver mineralization over a strike length of roughly 700 metres and remains open.

The most recent program is composed of 780 metres of core over four holes and targets vein mineralization that remains open to the north and at depth. Corvus' most recent assays come from hole 12-183, which cut 49 metres averaging 1.9 grams gold and 43 grams silver from 80 metres depth and includes a higher-grade interval of 10.4 metres grading 4.7 grams gold and 119 grams silver.

In early December, Corvus announced it had increased its land package at Bullfrog by roughly 52% or 23.5 sq.km through the staking of 297 federal mining claims. The company's land package now covers 68 sq.km.

“Our recent land acquisition is in response to the new high-grade vein potential we see in our north district and to the east,” commented CEO Jeff Pontius following the staking initiative. “These newly discovered high-grade systems have little surface expression and we feel the potential for new discoveries in this area is very high. We are excited to not only follow-up and expand the Yellow Jacket discovery but to begin exploring new targets generated from our new structural and geophysical data.”

Corvus saw a flurry of trading activity following the updated PEA as 123,500 shares traded hands en route to a $1.70 daily close. The company is currently sitting near its 52-week high of $1.84 cents and maintains 53 million shares outstanding and a $90 million press-time market capitalization.

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